US corporate bond spreads were little changed in quiet trading on Friday though traders said the tone was firm with continued interest in the sector. Most of the action was centered on the Treasury market after a weaker-than-expected jobs report, but traders and investors expect corporate trading volume to pick up in the week ahead on the solid outlook for company profits and the yield advantage over other sectors.
"People want to buy corporate bonds," said one trader.
Strong demand for corporate bonds amid still low borrowing rates have prompted issuers to tap the market and raise funding as interest rates threaten to go higher in the new year.
Most deals have met with a healthy reception from investors amid the search for yield.
Tower Automotive was one of the most active issues on Friday, after it deferred payment of a dividend tied to a convertible bond. The auto parts maker was expected to pay a dividend on December 31 for the convertible bond issued by the company's Tower Automotive Capital Trust unit.
"The deferment of the dividend payment was to be expected," said Shelly Lombard, senior credit analyst with Gimme Credit, an independent credit research firm. "They are still negotiating with lenders and one thing is to keep cash, not pay out other people" before those lenders.
Tower's 12 percent bonds due 2013 were last trading between 77 1/2 and 79 cents on the dollar, traders and analysts said on Friday.
Standard & Poor's on Friday cut its corporate credit rating on Tower deeper into junk and said it may cut it again, citing weak operating performance and liquidity pressures.
Tower wasn't the only issuer with rating problems on Friday.
Fitch Ratings cut Bombardier Inc and Bombardier Capital's senior unsecured debt and credit facilities to junk grade status with a negative outlook.
Spreads on Kraft Foods Inc bonds widened on Friday. Kraft's 4.124 percent issue due 2009 traded 0.08 percentage point wider at 0.77 percentage point over Treasuries, according to MarketAxess.
The maker of Kraft cheese and Maxwell house coffee on Thursday said its board authorised a new $1.5 billion share repurchase program and declared a regular quarterly dividend.